Business and management

The financial crisis

Unhappy birthday

THERE is a debate to be had over when precisely the financial crisis began. But five years ago today, on August 9th 2007, is the strongest candidate. That was when BNP Paribas stopped withdrawals from three investment funds because it could not value their holdings, and in particular their subprime-mortgage assets. “The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating,” was the way the French bank put it in a statement issued that day.

BNP was not the first to reach that conclusion. Bear Stearns, one of many names not to have survived the intervening five years, had stopped fund redemptions in July, for example. The increasing difficulties of America’s housing market had been evident for months. But the BNP news prompted the first big policy response from central banks to evaporating liquidity in interbank markets, as the European Central Bank immediately conducted a special refinancing operation. The credit crunch was officially on, and so was a crisis that has since brought down banks, throttled economic growth, changed the way finance is regulated, raised deep questions about the efficacy of markets and threatened the existence of the euro. Anniversaries are seldom epochal, but this one is.

And even though this is a birthday with nothing to celebrate, it is an excuse to repeat my favourite quote of the crisis. It is recounted by Alistair Darling, a former British chancellor, and inevitably comes from the lips of George Bush, reassuring the world’s finance ministers in November 2008 that Hank Paulson was on top of things. “You folks don’t need to worry. Hank’s got a handle on this. He’s going to freeze that liquidity.”

Bob Herbert's figure of thirty million unemployed looking for work was a totally accurate picture of this nation's rush to a second Great depression in 2009. This administration in spite of its marketing and public relations efforts is presiding over this coming storm. The only question that remains to be answered is whether this inaction to alleviate unemployment is planned by the administration or simply the result of unparalleled ignorance by the President. In spite of wake up calls from the Nobel prize winning economist Paul Krugman, the administration does nothing of any consequence. It's time for the administration to concentrate on solving the problem rather than criticizing George Bush that solves nothing.

Everyone currently seems to have their eyes and minds on the 2012 elections and how the Republicans may well gain control of the Congress. This emphasis frankly is not the issue, it's a diversion from the real mission creating work. The true task before the nation remains the creation of jobs and return employment from the years of international trade adventurism that has decimated the American middle class. Federal and state taxes need to be cut for those corporations willing to accept assigned quotas for job creation in this nation. A major action think tank composed of corporate CEO's and normal workers needs to be tasked with immediately addressing this coming possibility of depression with jobs. What is the status of such a think tank?

Never have so many pseudo political leaders of the administration been in a fuzzy fog of this depth. Americans hurting-pseudo political leaders vacationing, workers looking for work-White House lavish parties, unemployment being talked about nationwide in coffee shops-concerns about new healthcare, all that is lacking is the fiddle upon which the President can play. The administration's effort to change the subject from low job growth and economic depression in this campaign is mind boggling.

Hope and change is not working and must be immediately replaced with the plan action now and jobs immediately. It's past time for action, thanks Bob for your wakeup call once again. I have missed your writing.

HI,
The financial crisis. Unhappy birthday. Financial culture is pursued in bands as it’s too dangerous to meet it alone. Driving home from the University in Zurich I used to stop over for an Apéritif just to sit in the corner to collect my thoughts of the day. Being near the airport there were a lot of people from financial sector. young “jupis”. I impressed them with my knowledge the financial market, this by just reading “The Economist” which they did not seem to have. Competing in tails of risk and profit they all seemed to talk at once. What I’m trying to say is the financial crisis is a crisis of culture.